Stability rules the trend of the euribor. The reference index most used in Europe to calculate the interest rate on variable-rate mortgages closed at 3.65% in June 2024. This is 0.03 points below May’s 3.68% and only 0.041 points above January’s 3.609%. In short, the first half of the year shows few changes in this indicator, even after the European Central Bank cut official rates for the first time in 8 years by 0.25 percentage points to 4.25% earlier this month.
Around the start of the year the euribor fell more than expected compared with late 2023. This brought a level of stability that, while high, remains lower than the figures seen last year at the same time. This has helped banks improve their offers compared to a few months ago, according to Simone Colombelli, director of Mortgages at the mortgage comparator and advisor iAhorro. He notes that, given the current mortgage market, it could be said that the year opened on a good note for borrowers, allowing banks to offer better terms than before.
Flexibility from banks in granting mortgages, along with the euribor decline, has been aided by the ECB moving toward lower rates, though the rate cut itself plays a smaller role: banks anticipated Christine Lagarde’s move and lowered mortgage rates before the official rate cut was approved, Colombelli adds.
What will happen this summer?
The iAhorro spokesperson does not expect major changes from now until the end of the year: summer tends not to be a busy period for the mortgage and real estate markets. Banks keep services to a minimum and people go on vacation, often pausing mortgage decisions until they return in the fall. July and August typically see far fewer loans signed than in other months.
What if the ECB lowers rates again in July? On July 18 the ECB will hold its last meeting before the vacation break. Colombelli believes it is most likely rates will remain at 4.25%. If Lagarde surprises with another cut, it is unlikely to exceed 0.25 percentage points, and it is uncommon for banks to change prices and fees for such a small cut just before August, since summer adjustments are not typical.
The good news: variable-rate mortgages keep falling
Even though this month’s euribor drop is modest, it is good news for people with variable-rate mortgages. The latest reading is lower than June 2023 on an annual review, and also lower than December if the review is semiannual.
iAhorro calculated a scenario: someone who took a variable mortgage in June 2022 when euribor was 0.852% and must review monthly payments this month for a 150,000 euro loan over 30 years with a margin of 0.99% would have paid 542.65 euros per month at the start. In June 2023, when euribor reached 4.007%, the payment rose to 796.43 euros (an increase of 253.77 euros). With the current review (euribor at 3.65%), the monthly payment would be 765.90 euros, an estimated saving of 30.52 euros per month.
What about variable-rate mortgages with semiannual reviews? Using the same example, the initial payment was 542.65 euros, then rose to 716.81 euros in December and to 799.49 euros in June 2023. After a drop in December 2023, the payment fell to 770.60 euros. Given the small variation in the index, the upcoming semiannual revision would reduce the payment by only 2.10 euros to 768.50 euros per month.
Having a variable-rate mortgage remains unappealing when cheaper offers exist, whether fixed or mixed rates, with interest rates far below euribor. Today, in iAhorro, fixed-rate mortgages are well under 3% TIN, and mixed-rate mortgages offer excellent terms for the first five or ten years, often under 2% TIN, according to Colombelli.